The global markets heaved a sigh of relief yesterday as the US stepped back from the brink over its debt ceiling, saving it from debt default and signalling the end of a two-week government shutdown. The markets celebrated the news; share prices went up and it was business as usual for all. Politically, it was a small victory for President Barack Obama who had refused to bow before a group of Tea Party Republicans who were holding the entire nation hostage.
Republican leaders have finally conceded defeat in their two-week battle to derail Barack Obama’s healthcare reforms. With just hours to go until a deadline set by the US Treasury for extending the debt limit, House speaker John Boehner signalled he was ready to accept a Senate-drafted peace deal that contained almost no concessions to conservatives who had driven the country the brink of a new financial crisis. Boehner said he would allow the deeply divided House to vote on the Senate plan for a short-term increase in the debt limit and a government reopening. It is expected to pass with mostly Democratic votes. The agreement would extend US borrowing authority until Feb. 7, although the Treasury Department would have tools to temporarily extend its borrowing capacity beyond that date if Congress failed to act early next year.
The debt crisis has cost the US heavily. Rating agencies had issued warnings that they would be forced to downgrade America’s status, and dollar’s supremacy as a global reserve currency was under threat. It was a situation which seemed beyond the control of everybody – with a bunch of Republican hardliners taking the unprecedented, undemocratic step of shutting the government down to force the president to meet their demands.
Obama has emerged as the winner in this crisis. Polls had shown that the Republicans were losing support and if a default had actually happened, the party would have perished morally under public onslaught. The crisis also created deep divisions among Republicans. Moderate Republicans, bitter at the wounds inflicted on the party by a fight that ended in an almost complete failure to achieve any of the concessions they had sought, lashed out at their conservative colleagues. The divisions are likely to deepen in the coming days and the president must make sure that the situation is not repeated in future.
As the president said, the country has lost precious time by focusing on this manufactured crisis while there are more serious, real issues to attend to. The US was badly mauled by the international media, and experts. Though an immediate crisis has been averted, all the damage suffered is not reparable. For the same reason, US politicians will have to tread cautiously•